Strategic inertia or rational caution? Unpacking short-term rental pricing responses to hotel ADR fluctuations

Purpose This study aims to investigate how short-term vacation rentals (STVRs) adjust their pricing strategies in response to hotel ADRs. While prior research has emphasized the disruptive effect of STVRs on hotel performance, the reverse relationship remains underexplored. The study addresses this gap by examining whether market-level STVR price adjustments respond to ADR movements and how market conditions such as STVR density and ADR volatility shape these dynamics. Design/methodology/approach Using a balanced panel dataset of monthly observations from October 2014 to May 2022 across 16 US cities, the study applies a two-step difference Generalized Method of Moments (GMM) estimator. Key variables include STVR price adjustments, hotel ADRs, ADR volatility and STVR density, with interaction terms and lagged specifications to capture delayed and dynamic effects while addressing endogeneity and unobserved heterogeneity. Findings Results reveal significant pricing inertia among STVRs. In the primary GMM specification, current hotel ADRs are positively associated with STVR price adjustment, while lagged hotel ADRs are negatively associated with subsequent adjustment, indicating a delayed and partially corrective response. STVR density does not significantly moderate this relationship in the primary model, whereas the role of ADR volatility is more sensitive to specification in supplementary analyses. Originality/value The study extends revenue management and behavioral economics theory by highlighting delayed and asymmetric competitive interactions between hotels and STVRs. It provides market-level evidence on how STVR pricing responds to hotel ADR signals over time, offering implications for hotels, STVR operators, platforms and policymakers concerned with market efficiency and competition.